All kinds of assets rallied today, even the small ones.
The Russell 2000 index, a gauge of small-caps, jumped 1.8% to reach its highest level for this year. The S&P 500, which tracks larger stocks, rose 0.9%, clinching a new record. Only about 14% of the stocks in the index were lower today.
The tech-heavy Nasdaq Composite also hit a record, gaining 0.7%. Dow was up 1.4%, crossing the 46,000 threshold for the first time on record.
Crypto rallied, too, with both Bitcoin and Ethereum rising. Bonds gained largely across the board as yields fell on the 2-, 10-, and 30-year debt. Yields fall when prices rise.
Oil, gold, and the dollar were the only major assets that saw declines.
Part of the market’s good attitude stemmed from bad news. The number of people who filed for unemployment benefits for the first time is now at its highest level since 2021, the U.S. Department of Labor said. A lot of the surge came from Texas, which saw an increase of 15,304 in claims.
The news this morning overshadowed inflation data, which came in as expected.
“Circumstances suggest that worries over rising national claims are misplaced,” wrote Bespoke Investment Group. “If we strip out Texas, national claims look downright placid compared to the same week in recent years prior.”
Still, Thursday’s figures, when placed next to the monthly report on employment, paints a picture of a labor market that could use some help from the Federal Reserve. The Federal Open Market Committee meets next week and a rate cut is all but a guarantee.
Lower rates help boost hiring as companies take on growth initiatives with loans that come in cheaper.
Now, nearly 82% of traders think the Fed will lower rates by 75 basis points overall this year with some raising the specter of a 50 basis point cut next week, instead of a quarter point.
“Admittedly, it would be costly for the Fed to hold out against pressure to cut and then turn out to be wrong,” wrote Freya Beamish, chief economist from TS Lombard.
On the other hand, inflation data has left little leeway for error, she added, pointing to the rising number of items with inflation greater than 3%.
Inflation has stayed about one percentage point higher than the Fed’s 2% target while the weak jobs reports in recent months could mean nothing more than businesses being on hold amid uncertainty, Beamish wrote.
Tariffs are not a certainty, so U.S. businesses have no clarity on their internal costs, and in turn, profits. Americans are getting sensitive to higher prices on goods while there’s rapid inflation in raw materials. The global price of coffee, for example, has soared.